How Does Market Sentiment Influence the Shape of the Cryptocurrency Futures Curve?

Market sentiment is a primary driver of the cryptocurrency futures curve's shape. In a bullish market, traders are optimistic about future price increases, leading them to pay a premium for futures contracts, resulting in a steep contango.

Conversely, in a bearish market, traders anticipate price declines, causing them to sell futures, which can flatten the curve or push it into backwardation. The futures curve, therefore, serves as a visual representation of the market's collective expectation for the future price of a cryptocurrency.